On April 20, Alan Ross, a partner in BLG’s Calgary office, was invited to offer his insight to the Senate of Canada’s Transport and Communications Committee on their ongoing study of the transport of crude oil in Canada.
At its essence, social licence is the demand on, and expectations for, business enterprise that emerges from neighbourhoods, environmental groups, First Nations, communities, and other members of the surrounding civil society. It is not a literal licensing arrangement, but a “metaphor to encapsulate values, activities and ideals which companies must espouse within society to ensure successful operation."
Social licence issues have become part of any sophisticated corporate risk management strategy. In sectors with highly visible business activities, long term horizons, high exposure to global markets, or a wide range of stakeholders keen to influence the business, the need for a social licence to operate is even more important.
In the current climate for pipeline development, companies are generally viewed as responsible for obtaining social licence. The role of government is sometimes obscured in that debate. However, governments, as both regulators and recipients of a share of resource rents, have an important role to play. Both federal and provincial governments' role in the social licence debate arises from their powers to exercise reasonable control over persons and property within their jurisdictions respecting security, environment, health, safety and welfare, among other interests. The federal government can address social licence by improving regulatory processes that exist to ensure public trust. Alternately, governments and regulators through legislation, public policy or ensuring public trust in institutions, can facilitate social licence and the public acceptance necessary for new energy projects.
Social licence is largely untested as a regulatory concept, but can be considered a form of regulation by drawing from market forces and norms that encourage certain types of behaviour. Because there are consequences for failing to comply with social licence conditions, such as reputational damage, delay or ultimately preclusion of a natural resource project, it is nonetheless a de facto form of regulation.
The federal government clearly has a role in the social licence debate. What will be required is a meaningful intersection between regulation and social licence. This may help ensure that a pipeline company does not find itself with a National Energy Board pipeline approval, but without the ability to construct and operate that pipeline. Moreover, it can serve to ensure that Canada itself does not become little more than an energy superpower in waiting, as pipeline developers struggle to reconcile these social and regulatory issues.
To hear the full comments made to the Senate of Canada, see In Committee from the Senate of Canada – Transport and Communications – April 20, 2016.